The board of trustees of the National Association of Insurance and Financial Advisers voted on April 11 to recommend to its governing body that it give qualified support to legislation creating an optional federal charter.
The qualification is that NAIFA will work to ensure that any final legislation includes a provision giving its members the option to remain licensed and regulated at the state level, according to a letter to the NAIFA leadership from the trustees.
A final decision will come from the membership, which will be asked to vote on the recommendation at its annual meeting in San Diego in September.
The decision was prompted by the Treasury Department’s unveiling of a new blueprint for future financial regulation, as well as assurances by representatives of companies that they would support in final legislation provisions giving agents the option to remain state-regulated.
The concern of the trustees was that if a major life insurer elects to become federally chartered, it would insist that all of its agents be licensed at the federal level.
But, according to a top official at a major insurer who took part in the talks, the representatives of several large insurance companies as well as representatives of the American Council of Life Insurers assured the NAIFA leadership in several meetings that insurers who elected to become federally chartered would not force their agents to do the same.
Jack Dolan, a spokesman for the ACLI, a leader in the legislative battle to allow insurers to create an OFC, said the action of NAIFA trustees “is good news. An OFC offers producers and consumers many benefits.”
On the state-vs.-federal issue, Dolan added, “The bill, as written, permits insurance agents to sell for national companies on a state-issued license. We have pointed that out to agents groups to try to encourage their support for OFC.”
The decision did not sit well with another agent group, the Independent Insurance Agents and Brokers of America. Charles Symington, senior vice president, government affairs for the IIABA, said, “The NAIFA decision to move from neutrality to conditional support of optional federal regulation doesn’t come as a surprise to many in Washington D.C., however it is likely to be questioned by many life agents, particularly those agents who represent more than one insurance company.”
The IIABA and NAIFA have been working together on legislation that would recreate the National Association of Registered Agents and Brokers. The legislation, H.R. 5611, the NARAB Reform Act of 2008, was introduced last month.
It provides for streamlined non-resident licensing of insurance agents.
Jeffrey Taggart, president of NAIFA, officially confirmed that between 30% and 40% of NAIFA members either sell property-casualty insurance as general agents, or are employees of general agencies or captive agencies which also sell p-c products, for example State Farm and Nationwide.
He said all constituent groups of NAIFA, including state and local associations, are being consulted on this issue.
But Taggart did point to the NAIFA letter to its members suggesting they support an OFC. He noted that the letter said NAIFA would continue to support the legislation creating NARAB-II, the shorthand term for H.R. 5611.
The letter explained that the Policy Formation Subcommittee of the Trustees had recommended that NAIFA should “continue to support the principles underlying state regulation of the business of insurance and efforts to improve the state-based system of insurance regulation; and amend the current NAIFA policy on insurance regulatory reform to include support of the OFC concept provided that several conditions are met.”
Specifically, the trustees said in the letter, the qualifications are that, “Should the National Insurance Act become law, we want our members to have the option to remain licensed and regulated at the state level.
“We believe any modernization proposals should promote consumer protection, streamline agent licensing, improve product speed to market, and improve the competitiveness of the insurance industry,” the board added.
In the meeting with companies, the supporters of an OFC pointed out to the NAIFA trustees that the two bills introduced in Congress allowing an OFC provide an option for agents to remain state-regulated, the company representative told National Underwriter.
“Some members of the NAIFA policy committee acknowledged at the meeting that the bills give them that option, but are concerned that if a major life insurer elects to become federally chartered it will insist all of its agents and brokers also become federally chartered,” the company official said.
“The life insurers responded that they had no intent to do so, that good agents are hard to find and the marketplace dictated that life insurers accommodate the need of successful agents they want to recruit,” the company official said.
The NAIFA decision means that all major life insurance industry trade groups are backing such legislation. Specifically, these include the ACLI, the Association for Advanced Life Underwriting and the National Association of Independent Life Brokerage Agents.